Labour's tax U-turn

The Treasury dropped plans to increase tax on private equity just days before two of the industry’s richest tycoons made donations to Labour worth £1.25m

Sir Ronald Cohen, Chairman of the Apax private equity house, and one of Labour's biggest donors
Partners Worldwide, United Kingdom, participates in a discussion over lunch on the prospects for the middle east in the year 2020, during the Annual Meeting of the World Economic Forum in Davos, Switzerland, Friday, January 28, 2005. Photograph:Alessandro Della Valle/EPA
The Treasury dropped plans to increase tax on private equity just days before
two of the industry’s richest tycoons made donations to Labour worth £1.25m.

In the run-up to last December’s budget statement, ministers ordered officials
to draw up proposals to end the special low tax enjoyed by venture
capitalists, The Sunday Times has learnt.

However, according to Treasury insiders, hostility to the plan from No 10
meant that the private equity sector escaped any tax rises.

The pre-budget report of the chancellor, Alistair Darling, on December 9 also
exempted private equity bosses from the bonus tax imposed on other highly
paid City workers.

Nine days later, on December 18, Nigel Doughty, the chairman of the private
equity giant Doughty Hanson and owner of Nottingham Forest football club,
who has an estimated fortune of £119m, gave £1m to Labour.